The Federal Budget is due next week. It would not take much for the Treasurer to signal that insolvency law reform is back on the agenda. Happy to discuss with the Treasurer and his team if they are considering policy levers for productivity – insolvency reform deserves a place in that conversation.
The link between efficient insolvency systems and economic performance is well established – better restructuring frameworks support investment, improve capital allocation, and ultimately strengthen productivity. This is not theory. It is reflected in how capital markets price risk in different jurisdictions.
Australia was once a leader in corporate rescue when Part 5.3A (voluntary administration) was introduced. But while the environment has evolved, reform has largely been incremental. Meanwhile, several of our regional peers have modernised their restructuring regimes more aggressively, particularly around early intervention and streamlined business rescue pathways.
I had the opportunity to attend the Parliamentary Joint Committee on Corporations and Financial Services inquiry into corporate insolvency, and also co-author a submission to it. It was a genuinely rigorous process. Senator Deborah O’Neill, as Chair, ran a disciplined and highly engaged inquiry process — her background as a former school teacher showed in the way she drew out practical, grounded evidence from across the system – and her direct language. Read the transcript – her engagement with regulators and practitioners had its moments of unintended humour.
The PJC’s key reform themes were not radical but they were important:
- stronger support for early restructuring and earlier intervention;
- cleaner market regulation (ASIC, ATO, AFSA);
- improved accessibility and effectiveness of small business restructuring (SBR), safe harbour;
- greater scrutiny of the pre-insolvency advisory market;
- continued emphasis on tackling phoenix activity and improving enforcement coordination;
- refinement of safe harbour to give directors clearer, more usable protection;
- improved transparency and efficiency in external administrations; and
- a general push toward a faster, lower-cost insolvency system for smaller corporate failures.
Taken together, these reforms point in one direction – a system designed more for rescue and speed, and less for procedural weight.
The question is not whether Australia has a functioning system. It does. The question is whether it is still fit for a more competitive, faster-moving capital environment.
Budgets are rarely about insolvency law. But they are very often about productivity. And this is one lever that rarely gets pulled.
There is also a structural intervention that cannot be ignored to reduce the amount owing to ATO for unpaid GST, PAYG, SGC, now estimated in the range of $45b-$60b.
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